bankruptcy. there is an a bit of a landmark coverage study published in 2009, found 2 of every 3 bankruptcies are related to medical bills. in 2001 that number was 50%, 78% of those medical bankruptcies happen to people who have insurance before they got sick. it is a stock illustration of the consequence of giving health-insurance companies the bill to sell plants to buildings that don't sell coverage. how many medical bankruptcies with the bill under consideration today allow? >> i can't give you an exact estimate but it will dramatically reduce the number of medical bankruptcies. >> will there be no medical baker teeth? >> i don't know if there would be no medical bankruptcies that it is worth noting that some of those bankruptcies due to lost income due to sickness. is not clear to me that those would be prevented even if we had the most stringent requirements of affordability. >> the study says 2 of every 3 proceeds related to medical

bills. this is the landmark coverage study. didn't say it was related to people losing their income. >> some portion of that total is due to people's sickness. >> did you read this study? you are saying that it has to do with 2 of every 3 bankruptcies, which the harvard study says relates to medical bills, you are saying a more correct characterization would be vetted is also related to people losing their income? >> i don't know the exact division within the study that some portion of medical bankruptcy in that study is due to sickness. i want to reiterate the 2 base in which this legislation would dramatically reduce medical bankruptcies, it would make dramatic move to ensuring coverage is affordable through the exchange as well as through employer coverage plans that need to meet minimum requirements and would create a public insurance plan competing with private plan that would have benefits that would offer

people -- >> mr. chairman, i want to point out of insurance is affordable doesn't mean hospital bills are. >> there are limits on cost sharing within the bill. >> the gentleman's time has expired. >> thank you, mr. chairman. i want to say thank you to everyone for their testimony. this is an important issue we are facing. i am a big supporter of health i team, it has potential to save costs and improve health care delivery i studied wellness, we as a country have become too lacks in our own personal responsibility for taking care of our health. i do have deep concerns about the government option? i want to erect a question to mr. staffly. if you look at who is insured today. .. you concerned, what would

you attribute that to? compared to what is happening around world? >> it is -- the answer to that question is incredibly complex, the extent to which you look at survivability and what percentage is did to earlier detection in some situations and what is due to better treatment. the incidence of cancers incredibly high in this country compared to many other countries and in 7s of breast cancer is incredibly high compared to many other countries. it is an incredibly complicated

analysis to tease out what results in mortality benefit or survival benefit. >> the status of california? >> thank you, mr. chairman. i wanted to quickly, i know this would have been a better question for mr. hummer, but i want to focus on the medicaid and medicare issue and the concern that we would need to point some costs savings through that. in california, new york, people get nervous about this, we looked at those costs. could any of you comment on that and whether or not -- she mentioned limiting itemized reductions for medicare and medicaid, that would be a place of picking up savings. do you have experienced enough, what are we talking about conlan

and does that bring us to a question of whether the large states or small states, the competition is going to be such that both are paying essentially the same thing for that care which we know today is not true. >> if i understand your question correctly, let me answer it this way. it has been underway since the first of medicine reports and after a cooperative effort across the board in health-care to understand how it is that we address the system and quality problems because it is clear we have rollins and there are enormous costs linked to that. the bonet -- the estimate is that 35% of the money that we spend is for every year, for care that doesn't help people. we need to have -- the field knows this and they recognize it.

so we are on track to change the way it is done and the way care is paid for to make it based on quality in a way that was never done before. i like to quote something my business colleagues said. we pay for health care like nothing else. we pay the same regardless of whether it is world-class care, okay care or dangerous care and we don't know which is which because we don't get that information. we need to change the way we approach this and the current system has done some things very well but it has caused the train wreck. >> is there a way we can talk about the cost of health care as being equitable across all states? is that a realistic assumption that that can be done? >> it is part of this approach. people were shocked when the

numbers came out, that showed in control studies how the cost in florida was much higher than the cost in minnesota. people know that these are practice patterns. they don't have to do reside and of care. pinpoint ..

cost-sharing affects people at different income levels very differently and one of the things that i think is of real benefit in this legislation is you provide certain kinds of cost-sharing protections that are predicated on income. and i think that's very important. with respect to your -- >> you're talking about limiting copayments. >> i'm sorry? >> limiting copayments is that what you mean. >> there should be some out-of-pocket cap which this legislation includes which would preclude the kind of things that congressman kucinich was worried about in terms of medical bankruptcies. i think this legislation goes a long distance in providing protection on that. now, with respect to differences in care and just say two quick things, one of the most remarkable

-- in texas with el paso, texas and he found mcallen texas the costs were about double what they are in el paso. i think there are a number of things that we can do. i think there's some things that this bill would do that would help change those disparities. i think the promotion of comparative effectiveness research is very important in getting that proliferated as substantially as possible not precluding a doctor from, you know, making a clinical decision but at least providing guidance to the physician and to the patient, i think that's very important. so i think there are some things that can be done which i think will reduce this wasteful spending that occurs in too many places. one last thing, and that is --

>> it's going to be your last thing. >> the chairman wanted to us gavel us down here. we'll have to cut you off there. >> i don't know if he wanted to jump in on your question. he looked like he wanted to jump in on your response. >> the microphone. >> just very briefly. with respect to the cost of care and i think we really need to focus in on that, there's so many things that communities can do. unwarranted variation in hospitals, infection rates in hospitals, those sorts of things and if there were medical guidelines, evidence-based throughout the country, that would go a long way toward this. so if you gave incentives to physicians -- right now they are on peace work like a manufacturing line. if you paid physicians outcomes and encourage them to get into wellness and those sorts of things and that's the last thing i would say wegmans, safeways and others we want the

opportunity to work with employees to change behavior. the helps the employee. nobody wants to get a heart attack or get sick. and so this bill -- it looks like stops you from doing that. we really ought to be looking at it the other way. we need to change behavior in a positive way. >> thank you, mr. chairman. and thanks to the witnesses. great questions all around. i think the idea of personal opportunity is really important and i agree with my colleague, congresswoman morris rogers on that. i think we can all agree on that. obviously, i think we have to do all we can to promote personal responsibility and when it comes to wellness i think that's absolutely critical. there's no doubt about it. there's a lot to like, i think, about this bill. certainly, i think wellness is a part of it. an important part of it. health i.t. is important as well was mentioned. i think a public plan option is the way to go and i'll ask

dr. hacker about that in a second, dealing with catastrophic costs clearly that's something we have to deal with it, there's no doubt about it. and i could go on and on. i do want to pick up on the regional and geographic disparities question. i'm from iowa which may not surprise why i want to pick up on that. iowa as maybe everyone on the panel, maybe everyone not is consistently ranked at or near the top in terms of outcomes and deficiency, quality of service, all the rest. we're among the best if not the best. yet iowa and not just iowa but there are a number of states that rank high in terms of outcomes but rank low in terms of reimbursement rates. i want to ask any of you here to offer any remarks that you might with respect to the current bill and whether it really gets at that issue or not. and what we might be able to do to really remedy some of those geographic disparity that is we see. in particular, i think

mr. pollack and mr. shea might be willing to speak to that. >> i appreciate the question, and i think you're right on track. one of the ideas that has been widely discussed is the notion that we need to be able to, as we link payments to quality, we need to be able to do rapid cycle testing of the way to do that so that we're not in the system where medicare once a year makes set rates and so forth. we need a more -- we need a more flexible and nimble approach that really matches the quality improvement efforts that are being done around the country and rewards those and incentivize those. i know that in the senate health bill i was admiring some of the things that they did that were beginning steps to do this but sensible kind of things like we're going to pay a physician's office extra money if they do follow-up on hospital discharges. this is a huge problem. it costs us an enormous amount of money. it's very simple to solve but the current system we have has nobody responsible for that. well, why not pay a little bit extra money to save some money?

so i think this is -- this is one big point. the other thing i would just say is i really think that with the advented of a public plan, we're going to see a much more responsive public system to payment rates because it is not going to be just the elderly or just the poor. if we mainstream public insurance i think we're going to get a much more responsive public insurance system all the way around. >> okay. thank you. did you want to say anything, mr. pollack? >> i would just add to that that i think the more move healthcare into a more group-plan system, i think we're going to create a lot of efficiencies and we're going to provide greater coordination of care. and particularly for people who've got chronic conditions, many of them have multiple chronic conditions and if they go to one specialist and they go to another specialist, this specialist may be terrific but may not know how that treatment affects another problem.

so we do need greater coordination care. we need medical homes. and i think if we do that, i think we're going to not just improve quality but i think we're going to create cost efficiencies in the process. >> thank you. dr. hacker, i'm a former political scientist by the way, nice to see you here. thank you. i do want to ask you about the public plan choice and how it will create competition and in particular, if you could rebut the argument that private insurance is simply going to be pushed out of business by the creation of a public plan. can you sort of help us resolve that issue? >> first of all -- [inaudible] >> microphone. >> i'm glad to be speaking to a fellow political scientist. we don't get a lot of representation. no pun intended. that was why i immediately reached for the ideal of

democracy in talking to congressman kucinich. this argument that is often made that a public plan would undermine or destroy private insurance i think is absolutely backwards. it will change the business of private insurance but it won't put private insurance out of business. and i think there's two reasons to emphasize why that's the case. first of all, remember, that the core of this legislation and this approach is to build unemployment-based coverage and encourage employers to provide insurance which is why i emphasize requiring that employers either prior health insurance or help fund coverage for their workers which will prevent the kind of erosion for the point of base coverage that is often a source of concern. second of all, the public plan would be an option within the exchange. alongside private plans and that's why i think it's so crucial because as i said, it would be a benchmark for the private plans creating accountability where it often doesn't exist. and in your own home state i believe the largest insurer has

80% of the market. so having this benchmark and this competitive pressure is going to improve private insurers and second of all it will be a crucial back-stop for cost control and a backup for people who want to have an alternative to these dominant insurers. but i think just was said with regard to public insurance that it needs to innovate and improve its practices that that -- that kind of innovation needs to take place in the private insurance market and having that competition will encourage innovation. within the medicare program, for example, plans like kaiser, for example, do very well precisely because they have an innovative business model. private plans have more flexibility to adapt provider networks. they have what might be call a brand advantage in many cases as we know for many americans the idea of a public plan is still something that does need to be mainstreamed and i think that we should understand this, therefore, as not a threat to

private insurance but a threat to the old way of doing insurance. it is healthy competition that will improve both the public plan and private insurers. >> thank you. thank you, mr. chair. >> in calling on the members, the chair has made a mistake. we're going to keep doing what we're doing on our side working down on the members who haven't had a question but i should have come back and recognize -- since this is the second panel recognize the republican members for a second round. so finish with mr. lobesack and we'll go to mr. klein and we'll go back to our side. >> thank you, mr. chairman, for sorting that out. i must admit it got a little bit confusing. a lot of members. a lot of panels. my first day, that's my excuse. i don't know. >> mine too. [laughter]

>> i wanted to talk a little bit about small businesses. there's some unanswered questions in the draft legislation but there are some things that are in there. so the first thing i want to grapple here for a minute is what you're defining as a small business. is that 10 employees, 25, 50, 100. you have a working definition that you're working with? >> well, we represent the interest of those of 100 employees or fewer but that -- it may be the legislation ends upsetting different standards -- of different amounts that are less than that. >> i was trying to put in context what the bulk of your comments were addressed -- concerning businesses up to 100 employees. but in the legislation, it seems to me -- it says it provides a health insurance tax credit for

small businesses equal to 50% of the cost of coverage for firms where the average employee conversation with less than $20,000. which i suppose is an incentive to keep your wages low. firms with 10 or fewer employees are eligible for the full credit which phases out entirely for firms with more than 25 workers. so that clearly wouldn't address a large portion of the small businesses that you represent. if they stop at 25. >> in the modeling that the professor did for us we did look at generally tax credits that were a little bit more robust than that, that is absolutely true. there's a series of dials and levers as you look at sliding scales and tax credits and exemptions and you can't look at these in the absolute but, you know, we definitely have some models and clearly those models that are more, quote-unquote, generous in the sense of tax credits for larger amounts, sliding scales that aren't as high, greater exemptions is obviously going to be a greater

benefit financially to small businesses. so you have to look at this together. >> this sliding scale apparently stops at 25. we're not sure about the exemptions yet. that will be an interesting question. i notice modeling -- jonathan gruber's model the scenario that was most advantageous for small employers with the scenario that exempted small businesses and i think that was a 1 to 10 employer? is that what he was looking at there? >> correct. >> we still haven't answered the question of the 11 to 100. >> but there were substantial benefits for -- even with that model, huge benefits for small business with the reform and with the shared responsibility. >> but it depends where that small business exemption comes in; is that not true? >> well, pretty much -- pretty much every model that professor gruber model produced a better result than a status quo because it was such an absolute disaster for small business, fewer 50% small businesses are even offering anymore. clearly we would love to work with the committee to figure out

the right balance of tax credits and sliding scales and exemptions but virtually any system where some recognition is given to the special needs of small business, that has reform in it that deals with the cost containment is going to be far better for small businesses than the status quo. >> i certainly agree small businesses need some help in a lot of areas. let me -- let me move to mr. speranza if i could. i appreciate your comments about rochester, of course, in minnesota we have rochester, minnesota, which had been referred to a couple of times here. we're pretty proud of the mayo clinic and the work it's done there. some real collaborative work in changing things. can you comment -- do you have any more comments about reforms that were left out of the bill that you would like to have seen from your perspective such as strong medical liability provisions, things that would help control costs? your microphone, please.

>> yes. i think a few things that i think would make the most sense are as i mentioned earlier liability reform is very important. we know practiced in a defensive. healthcare technology, but doing that with having nationwide standards, being able to actually implement that and to get the savings would be very important, wellness. with respect to the kinds of programs we've talked about, we would like to have more incentives to change behavior, not less. those are very important. and the last point i'd make with respect to what was in the bill is the insurance option. this has everything to do with capitalism. it really does. there are other ways for us smart people is that collaborative way to solve that problem. in a different forum i would like to challenge the doctor to

capitalam. we can do that in a different place or find a way to collaborate because, quite frankly, i think he got it backwards. i believe in the american way in capitalism and that's a slippery slope you're talking about going down. >> thank you. i yield back. >> thank you, mr. chairman. i have a very quick question for mr. sapely and then i would to move on. since you're representing the erisa committee i wonder if you're familiar with hawaii's exemption from erisa? >> yes, i am. >> we have a large employer in hawaii as a matter of fact. >> and do you think hawaii's exemption or waiver from erisa should continue in any healthcare reform bill just to make sure they can continue doing what they're doing. >> boy, you really put me on the spot. >> if you can answer the question. i realize it might be more complex. >> it's one of my favorite states. we have a couple of states,

polynesian university and in a restructured system which i do think needs to be restructured you have to have uniformity. to the extent you don't have national uniformity, you have to have different challenges. we appeared before the hawaii prepaid health council all the time. and i would say we spend enormously more effort in one state than we spend in combinations of other states by virtue of the fact that we have to comply with unique requirements. at the same time, i know that it does provide some benefits to the citizens of the state of hawaii. the other thing that it does is we actually have an employer in the state of hawaii and their employees that have requested a plan that we offer in all 49 states except for hawaii and we don't offer it simply because we cannot comply with the